Frequently Asked Questions

Lawyers

1. Do I Need to Hire a Lawyer when Buying Property in Spain?

   The short answer is no. Technically, you do not necessarily require a lawyer to assist you in the purchase of your property. However, there are certainly many sound reasons to seriously consider hiring one. Besides being safe in the knowledge that all procedures of the purchaser will be above board, you are also guaranteed immediate action in the case of anything going wrong.
   
   
   • 10 reasons to hire a lawyer
     
     
     

2. It is advisable to hire a lawyer recommended by an agent?

   It is certainly not advisable, when buying property that a lawyer associated with the agent is appointed to oversee the sale. We are not implying that the lawyer is not ethical in the way he provides his service but there is not doubt that he will find himself in a situation of conflict on interest as he will have to facilitate the transaction to please the agents in question, and this may be dangerous if it compromises the safety and soundness of the procedure.
   
   

   Most of the time, an agent recommended lawyer will probably serve his/her purpose dutifully. If you want true 100% independent legal advice, hire an independent legal representative. Why take an unnecessary risk?
   

   • Independent Legal Advice
     
     
     

3. You are recommending the services of Lawbird Legal Services. Why should I take your recommendation?

   Lawbird is a law firm highly specialised in Spanish Property Law. The aim of the firm is to provide an independent and reliable service. We at Devwatch trust their independency as the firm works hard to gain clients through alternative ways to those used by many other law firms - the typical client recommendation made by estate agents, which ends up with the lawyer working for the agency instead of the client. This is depicted very clearly in the controversial article written by their lawyers some time ago titled Independent Legal Advice . The site where this article is hosted, marbella-lawyers.com, directly operated by Lawbird Legal Services, has been online for many years, and today is the leading website of legal information in Spain.
   
   If you are hiring a lawyer, we strongly recommend the services of Lawbird.
   
   
   

Bank Guarantees

1. What is a Bank Guarantee?

   Basically a bank guarantee is a document issued by a Bank or a Insurance Company that guarantees that all funds paid to the developer (plus legal interest) are recoverable in the event anything happens to the developer (bankruptcy, planning permission not granted/cancelled, etc). Bank Guarantees safeguard the interests of buyers.
   
   Always claim a bank guarantee when purchasing property in Spain.
   
   
   

2. My lawyer says I don't need to ask the developer for a bank guarantee. Is he correct?

   It is strange that a Spanish lawyer refuses to acknowledge the need for a bank guarantee, especially where the law (1968 Act) provides for coverage to the consumers and the developer is obliged to comply with it.
   
   Therefore, your lawyer is not correct in assuming that there is no problem with not giving out bank guarantee, or it could well happen that he does not wish to upset the developer, or perhaps an agent, if you have been recommended to the lawyer by any of the two.
   
   
   

3. I want to have my down payments guaranteed, but the promoter is trying to charge me for the arrangement. Should I pay for them?

   It is not the first time we have heard of this. It is the developer's responsibility to guarantee payments made by their clients. By law, these guarantee should be provided to the purchaser FREE of charge.
   
   
   

Developers

1. What is the best course of action if I discover the developer does not own the land on top of which he is building?

   If you still wish to proceed when you are aware of that, we would suggest you seek legal advice, apply for a bank guarantee from the developer to be granted to you simultaneously with the payment of the 50% part payment, and verify that the main legal points are covered in your contract with them.
   
   
   

2. What are our remedies in Spanish law if the developer defaults?

   If the developer defaults, the Spanish Civil Code stipulates that the purchaser has the right to either rescing the contract, that is, recoup the investment plus interest, or claim damages, if any. A lawyer should be able to provide advice in each particular case.
   
   
   

3. Is it legal for the developer to ask for more money on completion than the initially agreed price?

   The answer to your question is a plain no. It is illegal to demand further monies on a property which was bought at a certain price, but above all it is immoral and unethical. If you are in the position you mention I would suggest you seek legal advice and reject any attempt from the developer to impose a price increase. The contract you have signed with the builder is legally binding. As long as you have complied with your obligations, the developer has not right to demand more money,.
   
   
   

4. Is it risky to pay 50% of the property price to the builder upfront?

   Bear in mind it is a worthwhile business move for builders/agents to take as much money from the client as possible at the start. You must ensure that you obtain some sort of guarantee for any payment you make.
   
   If you are engaging the services of a builder-developer who does not give guarantees, we simply recommend you do not pay that amount of money, and seek some legal advice
   
   
   

5. What happens if the private contract of purchase or property does not properly describe the property we are buying?

   This depends on the extent of the difference between what it is described in the contract and the actual property. If it is just a slight variation, you may not have a case. However, if there is a clear deviation from the contract, you will obviously have the right to demand what you have agreed on. At this point it is highly recommendable to hire lawyer to deal with your case.
   
   
   

6. If the developer is late in completing the project, does the buyer have any right for getting the money back?

   If the developer is has exceeded his 6 months extension period allowed by Spanish Law, then you have the right either to demand your property plus compensation or cancel the contract and request a refund of your money back plus interests.
   

   This is provided that the delay is not due to reasons of the developer.
   
   
   

Misc Legal

1. How can I know if the property I am buying is free of any charge or debts?

   Search for its land registry certificate and in other legal resources of information like Tax Office, Town Coucil, etc...
   
   On a land registry certificate, you will see it there any the charges currently registered against the property. This is only done if formally requested prior to signing the deed.
   
   Also, on a copy of the last Council rate receipt paid and, a certificate signed by the administrator of the Community of owners you can see if the payments are up to date.
   
   A check into the Town Hall is also important, as the previous seller may have left unpaid "pusvalia tax".
   
   It is highly recommendable to engage the services of a solicitor when buying or selling property, as a solicitor will be able to conduct these checks for you.
   
   
   

2. Will paying a deposit on a house secure it for me?

   It is actually quite common practice in Spain to offer the owner or estate agent to remove it from the market while you arrange the legal side of things. If you are satisfied with the first legal checks, then you would normally be expected to pay 10% deposit on the price of the house to secure its sale to you.
   
   The deposit system has advantages for the seller and the buyer. If at any stage you decide to pull out of the deal, you lose the deposit. On the other hand, if the owner decides to pull out of the deal, then he or she has to compensate you with double the 10% deposit.
   
   This tends to make it very unusual for sellers to pull out of a sale because they have received a better offer from other potential buyers.
   
   
   

3. Is it interesting to use an off-shore company to purchase a Property in Spain?

   The cons for using an off-shore company to buy a property in Spain outweigh the pros. Buying off-shore in Spain is not anymore a valid proposal when purchasing property abroad, unless you are looking at either inserting a Spanish Limited Company between the property and the off-shore company, in which case your annual running costs could well run into a few thousand Euros, or where you are looking at concealing your identity for anonymity reasons.
   
   A property owned directly by an offshore company will attract costs of 3% of the rateable of the property, a hefty levy if the rateable value is high. If we consider the rateable value being say 150,000 Euros your liability would be of 4,500 Euros, in addition to the 1,5k euros charged by the offshore entity if it is based in Gibraltar.
   
   The most sensible options are to either purchase directly (in your physical name) or via a Spanish Limited company.
   
   
   

Finances

1. Should I take over the mortgage offered by the Developer?

   It depends on the conditions of the mortgage, but in many cases we can anticipate that by taking over the developer's mortgage (subrogation), you will be saving the mortgage arrangement fee (1.0% of the capital) and the stamp duty, currently at 1% of the total mortgage liability (the latter is in the region of 1.7% of the capital, as it comprises interests, late payment interests, penalties and other costs)
   
   if you decide not to take on the mortgage offered, it is important to bear in mind that the costs of cancelling the current one has to be met by the developer.
   
   
   

2. When calculating the maximum loan, what is the property market value used?

   Most banks are now lending on the basis of the real market value of the property, and they are not using the deed value of the property, which is a figure can be easily manipulated and does not always reflect the true value of the property.
   
   When purchasing a property in a new development, it often happens that between the time the works start until completion and subsequent handover, there has been an appreciation of the property value, and therefore the purchaser is able to raise the initially offered mortgage loan to adjust it to the real market value.
   
   This affects buyers who purchase the (incorrectly called) rights to that property, in exchange of a premium, and require higher financing to complete the purchase.
   
   
   

3. Can I obtain a mortgage without any documentation?

   Unfortunately not.
   
   Spanish banks will not lend money unless the borrower can provide proof of having enough income, therefore, they do not consider an application without documentation (they do not grant non-status mortgages).
   
   However, banks do not normally check the veracity of the documentation submitted. If they did, they will lose business to other lenders willing to assume the risk of approving mortgage on the basis of photocopied documentation. The practise of make up documentation is nonetheless illegal and could give rise to problems.